Tyler Cowen on Big Business

My guest for this episode is Tyler Cowen (episode page), professor of economics at George Mason University, blogger at MarginalRevolution.com host of the Conversations with Tyler podcast and author of numerous books, the most recent of which is Big Business: a love letter to an American Anti-Hero, which we cover in the show. 

In the book, Tyler convincingly makes the case the big businesses are actually quite good for society and us individually. One reading of the book that we dig into is that the virtuous big business is a very American institution. Crony capitalism, state champions, these are not the kinds of engines of innovation and intangible capital that a more true market economy only can produce. Here is the bit from the interview:

David Wright: You’re bringing it up pretty succinctly there, but that was my second reading of the book, which is this very American book. And that’s depressing where it seems to me, if you’re anywhere else in the world, and we can talk about China in a second, you’re thinking to yourself, well, that’s great, that big business is good. But what does that going to be for me? Like what does that mean for me in Switzerland or Poland or Ghana or something. It’s depressing.

Tyler Cowen: It’s a very patriotic book. That’s one of the Straussian readings. Maybe is even thumbing its nose a bit at foreigners, but I think an implied message is be friendlier to your multinational enterprises. They can do a great deal for your nation as they have done in many countries around the world, most obviously Singapore, but much of East Asia, including parts of China and not embrace this. India is the country that probably needs that lesson more than any other. They’re one of the most hostile to outside business, including American big business.

Here is another bit on how the mission-driven culture of startups (the best of whom become the best of the big businesses!) might stem from societal inequality!

David Wright: It feels to me maybe that that is changing a bit. I don’t know why I think that maybe I’m just becoming more aware of it as I get older, but I wonder how much business was mission-driven in the past? Any sense of that?

Tyler Cowen: There was a phenomenally strong sense of ethical mission in American businesses, especially in the Midwest throughout the 20th century. It was very modest. It wasn’t always trumpeted. There, of course, was not any internet, but it was deeply internalized and very strongly felt and they propelled this country to many great achievements. But I think this renewed sense of mission for employees, it stems from income inequality, oddly enough. So, income inequality for labor is a sign that talent is quite scarce for whatever reason. And when talent is scarce, for one thing, talent’s already earning a lot of money, and they want something other than money and it’s hard to attract people. So, you build a mission into the enterprise. I think there’s a lot of cases where businesses may start approaching mission somewhat even cynically like, oh, we just want to make more money. But over time they do it. They start believing it. It becomes sincere. It’s a kind of artificially manufactured true sincerity and the final equilibrium.

We cover so much more ground, including:

  • Where businesses fit into the social intuition of the human mind
  • Similarities between how we treat famous people and big business and what another of Tyler’s books, *What Price Fame* can teach us about big business
  • What is good management and what effects does management have on employees?
  • How the book is an American book and how it is NOT a Chinese book
  • Crony capitalism doesn’t exist here, but where might it exist in the world?
  • Wall Street and Financial Dark Matter
  • How Tyler views the firm differently from most economists

Thanks for listening!

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